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Mergers And Acquisitions: HR Perspective

By Sanket Thakare (MBA II)


A merger or an acquisition in a company sense can be defined as the combination of two or
more companies into one new company or corporation. The main difference between a
merger and an acquisition lies in the way in which the combination of the two companies is
brought about.
A merger is a combination of two companies where one corporation is completely absorbed
by another corporation. The less important company losses its identity and becomes part of
the more important corporation, which retains its identity. A merger extinguishes the merged
corporation and the surviving corporation assumes all the right, privileges, and liabilities of
the merged corporation.
As per the survey conducted by Corporate Strategy Integration Performance, 44% of the
respondents rated Integration as the critical reason of success or failure of merger and
acquisition, while Strategy and Valuation were rated as 28% each.

In another study done by Corporate Leadership Council, where in respondents were asked to
rate most critical elements for success of merger and acquisition. The first four factors
contribute to Human Capital Elements whose mean comes to 30%. The remaining factors
contribute to Corporate Strategy and Business Development Elements whose mean comes to
11%. This shows that Human Capital elements contribute to substantial weightage in success
or failure of the deal. Thus one should never ignore Human Capital factor in integration
planning.
The success of any merger or acquisition, large or small, depends as much on effectively
managing people and the organizational environment as it does on managing the timing and
financials. More M&A deals fail because of unresolved cultural issues than because of
transaction fundamentals. The reality is that business performance is driven largely by an
organizations people specifically, their skills, competencies and contributions so their
ability to stay engaged during difficult transition periods is critical. And thats where HR
plays a pivotal role. Towers Watson
Following figure depicts five stage process of Mergers and Acquisition process. Two
problems can be identified in the five step process. The first problem can be recognized in the
first two steps. The company initiating the merger process fails to identify human capital
integration risks in the early steps. The second problem can be recognized in the last three
steps. During these steps, company fails to plan proactively and respond to human capital
integration risk.

Thus Merger and Acquisition is one of the most important strategy for growth of the
companies. Most companies fail to consider Human Resource or Human Capital factor in
planning and execution of the process. It is the most asset of the company which is not
reflected in the balance sheet. It is however one of the crucial factor in determining the
success of failure of the merger. Thus a company should check if the workforce is compatible
with the other company and identify the possible risks in the planning process. Such
identified risks should be answered while execution of the merger process.